The literature on the competitiveness of locations has traditionally focused on countries. Over the last decade, however, subnational regions have gained increasing attention both as a level of analysis and as a level for policy making. This chapter aims to explore what this new context implies for the role of regional governments. It is motivated by a concern that regional policy is facing an “implementation gap.” There is much thinking on the importance of regions and the policies that should be designed towards them. But there is comparatively little work on what regional governments’ role should be in implementing these policies relative to that of other levels of government as well as what implications this has on the capabilities they need.

The case discusses the origins and development of the European Integration process from the post-war period up to 2007, focusing particularly on the efforts of the Lisbon-agenda under way since 2000 to enhance Europe's competitiveness. It discusses the different policy areas that have been approached at the European level over time, and provides background on the architecture of European institutions. The case enables students to understand how European integration has affected competitiveness across the continent. It provides a platform to discuss the impact of collaboration across countries in large geographies on competitiveness, and the lessons that the European integration experience might hold for other world regions.

Competitiveness research aims to enhance our understanding of the drivers of prosperity differences across locations and of policies that can sustainably raise a location’s prosperity level. The paper outlines key elements of the competitiveness framework and discusses how it relates to the idea of structural transformation. What emerges are significant similarities between the two approaches: They both take a granular and often sector-specific perspective on microeconomic structures and systems, moving beyond macroeconomic, economy-wide, or single-factor microeconomic explanations of prosperity and development. But the analysis also reveals meaningful differences between the two: Most fundamentally, the chapter argues, the competitiveness literature treats sectoral composition as a key but largely endogenous part of development, while structural economies conceptualizes it as a fundamental driver. Competitiveness policy is about leveraging existing clusters as a platform for upgrading microeconomic fundamentals, where structural policies aim to change the industrial composition of an economy more directly. While recent work has significantly narrowed the differences between the two approaches, the chapter points out where and how they still matter, especially for policy practice. Further dialogue between the approaches, the chapter concludes, could lead to actionable advice on more robust policies that drive both structural change and competitiveness upgrading.